Wednesday, March 13, 2013

Positive economic assessment of proposed potash mine

Passport Potash released highlights of the Preliminary Economic Assessment of their Holbrook basin potash project that appear to be very positive. [Right, land holdings of Passport and their partner. Petrified Forest National Park in light green. Credit, Passport Potash] The report projects an underground mine, using room and pillar recovery, producing 2.5 million tonnes per year. [Total U.S. production is only about 1 MT per year currently, with the rest of demands being imported]. The cost to develop the mine is estimated at $1.95 billion. The total operating expenditures average $114 per tonne, which the company says would make it one of the lowest cost new mines being developed anywhere in the world. The full announcement from Passport is posted below:

Passport Potash Inc. is pleased to announce the receipt of a positive preliminary economic
assessment on its Holbrook Basin potash project (the “PEA”), prepared in
accordance with National Instrument 43-101 standards of disclosure for mineral
properties. The independent PEA was prepared by ERCOSPLAN Ingenieurgesellschaft
Geotechnik und Bergbau mbH (“ERCOSPLAN”), a consulting and engineering firm,
specialized in the potash and salt industry, headquartered in Erfurt, Germany.
The key findings of the report include the following:

KEY FINANCIAL HIGHLIGHTS

Pre-tax NPV@12%

$3.25 billion USD

Pre-tax IRR (30% income tax rate)

31.59%

After-tax NPV@12%

$2.19 billion USD

After-tax IRR (30% income tax rate)

27.08%

Estimated Total Capital Expenditures

$1.949 billion USD

Estimated Total Operating Expenditures
(includes sustaining OPEX)

$114/tonne KCl USD

Payback Period (from start of
production)

8 years

ASSUMPTIONS

Discount Rate for Project Related
Risks

12%

Potash Price for 2013 (standard MOP)

$430/tonne USD

Accuracy

+/-35%

KEY RESOURCE HIGHLIGHTS*

Measured Mineral Resources (including
Passport and Hopi properties)

34.77 MT

Average Measured KCl Grade

14.38%

Indicated Mineral Resources (including
Passport and Hopi properties)

363.17 MT

Average Indicated KCl Grade

14.68%

KEY MINING PRODUCTION
HIGHLIGHTS

Annual Production (60% minimum K2O)

2.5 MT MOP

Life of Mine

26 years

Mining Method

Conventional Underground

Room & Pillar

Processing method

Hot Leach

Plant Recovery Rate (KCl)

89.8%

Estimated Employees (Mining,
Production, Management)

1,770

*Mineral resources that are not mineral reserves do not have demonstrated
economic viability.

Passport’s President and CEO Joshua
Bleak commented, “We are extraordinarily pleased with this robust report for
our Holbrook Basin potash project. We feel that the strong fundamentals of this
report validate everything we have believed about this project, and are
confident that the strength of this report will allow us to gain traction, even
in the face of a moribund resource market.The CAPEX of US$1.95 billion for a 2.5 MTPA mine makes this one of the
best values in the potash industry.A
good metric for judging the value of a potash project is the CAPEX cost per
tonne of finished production.Using this
metric, the Holbrook project is one of the lowest cost projects of all the
greenfield potash projects currently being developed.When you couple these factors with the
estimated OPEX of US$114/tonne, the Holbrook project has potential to be one of
the highest return potash projects in the world. Based upon the recommendation
of ERCOSPLAN we will move forward with our Pre-feasibility Study which we plan
to release at the end of 2013, and our Feasibility Study which we plan to
release at the end of 2014. We are excited to take this report to the strategic
partners with whom we have had discussions over the past year, and be able to
show them the value that is in this project.”